mitigating delay claims and scheduling best practices · scheduling best practices. prepared and...

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Mitigating Delay Claims and Scheduling Best Practices

Prepared and Presented by:

Raquel Speers Shohet, EI, PSPHill International, Inc.

Claims and Consulting Group10801 W. Charleston Blvd.

Suite 650Las Vegas, NV702-212-7430

Biography• BS Civil Engineering, University of Nevada Las Vegas• 25 years of construction industry experience in the engineering, cost, scheduling,

estimating, and field disciplines• Heavy Consulting Experience for Public Owners and Contractors • Multi-industry experience on over $6B in projects• Developed and managed over 350 contractor and/or owner schedules• Specification writing specific to scheduling and delay for Public entities• Primavera Standards development for contractor clients• Expert Testimony• Subject Matter Presenter for professional industry associations• Deep commitment to educational outreach• Deep commitment to professional organizations• Mentor to local professional organization

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Claims & Risk Awareness

• How to Mitigate Claims– Risk Awareness– Contract Risk – Project Delivery Approaches & Risk– Contract Awareness– Fact Awareness– Claims Awareness– Best Practice Management

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INTRODUCTION

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Change is Inevitable in Construction

• Even successful projects have changes and/or claims

• Parties are typically islands of self interest• Best way to handle claims is to proactively

anticipate them• Risks can be mitigated

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Claims and Risk

• Claims (& changes) are construction risks that were not prevented from coming to fruition, or mitigated early - causing cost or schedule impacts:

• How do you manage risks & avoid claims?

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The Three Legged Stool

• Determining Liability• Proving Causation• Proving Damages

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Principal Causes of Disputes• Failure to Recognize/Acknowledge Change Has

Occurred– Failure to Deal Promptly with Changes and

Unexpected Conditions• Ambiguous/Defective Contract Documents• Contractor Misunderstands Scope• Poor Communication Between Project Participants• Personalities (Organizational & Personal)• Failure to Proactively Resolve Problem

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How to Avoid Claims?

• Risk Awareness• Contract Awareness• Fact Awareness

ClaimsAwareness

With the above, you have the tools for

Claims Avoidance

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Claims Avoidance begins with a proper perspective about your approach to the project delivery system, project administration, and changes.

Claims avoidance = managing risks to prevent the occurrence of claims or to minimize its impact

Claims Avoidance

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Project Team Skills Required

• Contract Awareness• Risk Awareness• Fact Awareness• Subject Matter Experience• Project Management Knowledge & Skills

– Proactive & Reactive• Schedule Control• Cost Control• Change Management

“Project Controls”

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Objectives for Project Control System

• Efficient means to measure, collect, verify & quantify FACTS regarding schedule, cost, resources, procurement & quality

• Provide standards to measure & compare status• Report correct & necessary information in appropriate

detail for management• Identify & isolate critical information• Deliver information timely to support corrective action.

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Project Schedule Function

• Planning Tool– Establishes a reasonable plan

• Documentation Tool– Accurately documents construction status– “JUST THE FACTS!”

• Forecasting Tool– Forecasts impact of events and path

forward

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Schedules Are Factual Records

• Active review of schedule updates– Timely submission– Status of activities planned for that period– Accuracy of activity start and finish dates– Accuracy and sufficiency of logic– Changes & variances between updates– Effect on milestones?– Effect on project completion?

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Keys to Success

• Documentation• Thorough understanding of contract

requirements• DOCUMENTATION• Well thought out procedures• D-O-C-U-M-E-N-T-A-T-I-O-N• Good working relationship between all parties• D-O-C-U-M-E-N-T-A-T-I-O-N

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Documentation

•Claims are disputes over facts, not over law. • The party that keeps better records to preserve and identify the facts, or the party that is better trained to recognize and mitigate a problem, is going to have the advantage.

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RISK AWARENESS

Risk

“Project risk is an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project objective”

“A risk has a cause and, if it occurs, a consequence”

PMBOK Guide, 2000 Edition

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• In general, Risks should belong to the parties who are best able to evaluate, control, bear the cost, and benefit from assuming the risk.

• Every Risk has associated unavoidable pending cost.

Risk Approach & Philosophy

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RISK OF COST IMPACTS DUE TO CHANGESINCREASES AS PROJECT PROCEEDS THROUGH CONSTRUCTION

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Claims Management:

• Identification – proactive identification of inherent risks

• Transfer/Avoidance – proactive: before contracting

• Mitigation – reactive: during construction as the issue arises

• Resolution – reactive: after issue arises

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Claims Avoidance• Thorough understanding of contract document general and

special conditions• Proper examination of specifications and plans• Awareness of unmanageable risks, potential ambiguities, high

risk issues, etc. (Requires proactive “what if” consideration while reviewing contract scope and contract documents)

• Where possible before contracting – Transfer risks• Prepare and implement procedures and training for project staff,

lines of communication, etc.• Proactive analysis & responsive action• Dispute resolution process and procedures

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Claims Mitigation

• Diligently and promptly assert your rights allowed by the contract documents.

• Revisit the contract requirements.• Review/assess the current status of the project and all interfacing

activities.• Develop a strategy to mitigate the impact of the event causing

added costs or delays.• Implement the strategy.• Develop and implement a program to collect the facts to support

a change order for added costs and time.• Analyze the cost and time impacts

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CLAIMS RESOLUTION

In addition to completing the mitigation measures:• Prioritize the outstanding issues for resolution, in

terms of time and cost• Initiate the dispute resolution process• Assertively pursue resolution• Seek legal counsel guidance• Obtain management assistance

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CONTRACT RISK

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CM / Engineer / Consultant Documents

Hierarchy of Obligations & DutiesLaws,Rules,

Regulations &Ordinances

AgreementGeneral, Supplemental & Special

Conditions, BondsTechnical Specifications,

Drawings & General Conditions

Owner Documents

Project Procedures & Guidelines

Contractor Means, Methods, Techniques, Sequences & Procedures

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Resource and Project Risks

Type of Risk Owner’s Risk Contractor’s Risk

Adequacy of Project Funding Yes Not usually

Adequacy of Labor Force Not typical Yes

Permits and Licenses Costs; often

mostly

Site Access Maybe Maybe

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Performance Related RisksType of Risk Owner’s Risk Contractor’s Risk

Adequate Plans and Specifications Yes Not usually

Cost under-estimation sometimes YesEquipment, materials, space, etc If owner supplied Yes

Means and methods If specified Yes

Delays in presenting changes Yes Yes

Delays in addressing disputes sometimes sometimesLabor productivity and subcontractor work Yes, if caused Yes, if self causedSubsurface conditions Yes maybe

Delays in performance Yes, if caused Yes, if caused

Worker and site safety Possible Yes

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Outside Influence Risks

Type of Risk Owner’s Risk Contractor’s Risk

Government Acts Yes Possible

Weather Depends on contract

Acts of God Depends on contract

Union activities Typically yes

Cost escalation Depends on contract

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Project Delivery Approaches & Price Mechanisms Have Different Risks

• Cost Plus • Fixed Price• GMP• Unit Price• Design-Build

Who bears the risks for costs/delays for the above contract delivery approaches?

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Contract Risk Project Delivery Methodology

Ris

k

Turn Key

Design-Build

GMPDesign-Bid-BuildSingle Prime

Multiple Prime

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Design Error Risk ResponsibilityDesign – Bid - Build Design – Build

100% Error Free Design

Design Standard of Care

Costs of Errors in Plans are Owners’ Risk

Costs of Errors in Plans are D/B Contractors’ Risk

Costs of Negligent Errors in Plans are Engineers’ Risk but Owner has to pay contractor and seek

reimbursement

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Contract Awareness

• Review and summarize contract general conditions, special conditions

• Understand contract provisions entitling cost & time adjustments

• Identify express obligations of all parties• Evaluate implied conditions of all parties• Notice requirements

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Contract Awareness

• Understand remedies available to all parties• Understand risk shifting, retention, sharing• Prepare outlines or procedures for project staff

to implement contract administration functions• Assign responsibilities for contract administrative

functions

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State DOT Specification 1.6 Baseline Construction Schedule

C. Schedule Submission

Notice of Award

Within 14 cd of Notice

of Award

Submit Baseline Plan

CPM

Engineer review & return

Within 7 cd of Receipt

Complete Baseline

Schedule and Obtain

Engineer Acceptance

Within 30 cd of Notice of

Award

4. “No progress payments are madeBefore the Engineer accepts the

baselineConstruction schedule.”

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FACT AWARENESS

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Fact Awareness

• With Contract and Risk Awareness, as events occur during performance, analyze the facts for comparison to the Contract and Risk framework

• Prepare & timely submit Change Requests• Need constant vigilance, training, experience to

improve this required skill• Apply prudent, timely project management skills

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Event Method• Eyes & ears on the project as it progresses• Discuss progress with your team• Listen to contractor and subcontractors• Review daily reports• Compare anticipated progress:

• Lookahead schedule• Shop Drawing/Submittal progress• RFIs• Change Order Submissions

• Perform a daily, informal variance analysis – record impressions in your diary

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Documentation

Claims are disputes over facts, not over law. The party that keeps better records to preserve the facts or the party that is better trained to recognize a problem is going to have an advantage.The party that contemporaneously observes and records relevant critical facts will have not only better records, but the better ability to address claim issues.

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The Three Legged Stool

• Determining Liability• Proving Causation• Proving Damages

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CATEGORY OF DELAYS

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Categories of Delay

• Excusable: A delay caused by unforeseeable events beyond the control and without the fault or negligence of the contractor. Examples: Act of God, Unusually severe weather, labor disputes.

• Compensable: Excusable delay, caused by an act or failure to act by the Owner. Contractor is entitled to a time extension and damages resulting from the delay, as allowed by the contract.

• Non-Excusable: Due to act or omission of the contractor, or falls within the risks of the contractor as contemplated by the contract. Contractor is not entitled to damages or time extension.

• Concurrent: Separate delays occurring at the same time, but caused by individual events where the Owner is responsible for one delay and the contractor is responsible for another.

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Excusable Delays (Typical)

• Unusually severe weather• Natural disasters, Acts of God• Unforeseeable labor action, where Contractor is

not at fault and it beyond its control

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Compensable Delay (Typical)

• Owner caused examples:– Defective specifications– Unavailability or late owner furnished material– Owner directed changes– Differing site conditions

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Concurrent Delay

• Owner and a Contractor are each responsible for separate critical path delays in completing the work, during the same time

• Owner is barred from assessing the Contractor with liquidated damages and the Contractor is precluded from recovering delay damages

• Contractor is entitled to a time extension but not delay damages.

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Schedule Variances vs Critical Path Delay

• If an activity starts on time but finishes late, this finish delay, or variance, may be commonly called a “delay,” but it may not be a “critical path delay”

• Variances are common • If the cause of the variance caused costs to increase,

but is not impacting the critical path, it may still be compensable under the Contract (but without entitlement to a time extension): Disruption

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Proving the Delay or Disruption Claim

• Often have both Delay and Disruption• Often need a schedule or delay analysis to show

how compensable events caused impacts to planned activities

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Acceleration refers to applying additional resources above those planned to complete the work earlier or in response to mitigating a delay that has already occurred or is anticipated.Two types:– Directed– Constructive

Acceleration

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Constructive Acceleration

1. Excusable delay exists,2. Contractor gives timely notice to Owner of:

Entitlement to a time extensionRequests a time extension

3. Owner failed or refused to grant the entitled time extension ( or grants an insufficient time extension) within a reasonable time,

4. Owner expressly or impliedly directed the Contractor to perform prior to the entitled completion date (this is an Acceleration Order), and

5. Contractor proves it accelerates the work in response to the owners order and incurred increased costs (damages).

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Methods of Acceleration:• Overtime• Additional Shifts• Additional Crews

Types of Damages:• Overtime Premiums• Shift Differential• Additional Supervision• Loss of Productivity

Acceleration Claims

SCHEDULING PRACTICES

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Setting Best Practice Standards

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• Scheduling Baseline Standards– Establishing templates– Establishing Criteria

• Updating Standards• Managing the Critical Path

– Identifying the critical path– Critical Path Accounting

• Managing through the delay process– Identifying delays– Accounting for delays– Resolving delays

Best Practices Implementation Challenges

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• Technology

• Paradigm Conversion (Stand-alone to Enterprise)

• Corporate Standards

• Re-thinking Processes

• Training New Processes

Primavera Implementation Benefits

• Corporate Standardized Processes• Consistent Project Roadmaps• Consistent Tracking and Analysis• Effective Risk Management• Enhanced Executive Oversight • Enterprise Reports and Metrics• Early Issue Identification and Resolution• Understanding the Value of the Best Practices System• Executive Buy-in• Enterprise Collaboration• Commitment

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Planning for Project’s Inevitable Delay

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Planning For Delays

• 6 Phases in the Construction Project– “Love is Blind” Pre-bid Period– Enthusiasm Honeymoon– Panic Running out of Time

and money– Search for the guilty Notification of claims– Punishment of the Fire the PM, Claims innocent– Praise for the Opening Ceremony, non-

participants Dedication of the facility

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Planning For Delays

• Scheduling requirements have increased for the following reasons– Economics– Scheduling Efficiency– Technology Availability– Legal Application

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BMP Specifications

• Public or Federal Owners• Associations - AACEi

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BMP Specifications-Owner

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BMP Specifications-AACE

• This recommended practice focuses on the basic elements necessary to perform a Time Impact Analysis (TIA.) Necessary considerations and optional analysis practices are described. The TIA is a ‘forward looking’ prospective schedule analysis technique that adds a modeled delay to an accepted contract schedule to determine the possible impact of that delay to project completion.

• This practice is not recommended for a retrospective (hindsight or forensic) view taken after a significant passage of time since the delay event.

• This TIA practice concerns itself with time aspects, not cost aspects of projects. The time impact must be quantified prior to determining any cost implications. No practical advantage is obtained by including cost factors into a time impact analysis. Linking time and cost into one analysis implies that time impacts are a function of costs, which for the purposes of a prospective TIA is not true. Separating time analysis from cost analysis makes TIA inherently easier to accomplish and accept contractually; eliminating the cost driven considerations from both ‘creator’ and ‘approver’ of the TIA.

• A TIA may be performed to evaluate the potential or most likely results of an unplanned event. This event may be either schedule acceleration or a delay. For simplicity and clarity, we will refer to this event as a delay (i.e., acceleration can be considered as a negative delay).

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Schedule Specs Consideration

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Understanding the Critical Path

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Subgrade

Elec UG

Plum UG

Slab on Grade

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5

5

3

Understanding the Critical Path

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Prep Slab

UG Elec

UG Plum

(delay)

Slab on Grade

Adjusted As-Built Schedule

Process Flow Information Management Considerations

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Added Summaries:Cost, Critical Path, Schedule Impacts, Change Order, Contingency and Start up Plans Summaries

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Updated Schedule

Inserted Delay

• Extend Duration

What Delays Do

Recovery From the Delay

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Updated Schedule

Inserted Delay

Reduced Duration

• Managed Acceleration

Managing Project Delays

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• Resolving the Delay• Analysis Options

– Total Time or Duration Analysis– Adjusted As-Planned or Baseline– Adjusted As-Built– Contemporaneous Comparison

Total Time Method

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Methods for assessing delay damagesTotal-Time Approach

Comparison of the As-planned and As-built schedule, the difference being the delay impact

Similar to the “Total-Cost” approach in calculating damages

Strengths & Weaknesses

Total Time Method

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Original Duration

Actual Duration

The Difference

Adjust As-Planned MethodMethods for assessing delay damages

Adjusted As-Planned Schedule Approach

Impacts are incorporated into the As-planned schedule or baseline schedule. The result is the adjusted as- planned. The impact to the schedule is the delay period


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Adjust As-Planned Method

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Baseline Schedule

Adjust As-Planned Method

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Baseline Schedule

Inserted Delay

Adjusted As-Built Method

Methods for assessing delay damages

Adjusted As-Built Schedule Approach

This method uses the complete as-built schedule and removes the delay impacts, the delay period to create the adjusted as-built schedule


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As-built Delay Occurrence


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Collapsed Schedule

Impact

Contemporaneous Analysis Method

Methods for assessing delay damages

Contemporaneous Time Frame Schedule Analysis

This approach employs the schedule updates at or near the time the delay-causing event occurred


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Contemporaneous Method

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Updated Schedule


Contemporaneous Method

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Updated Schedule

Inserted Delay

Summary Delay Considerations

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• Define Baseline Schedule• Define Modified Baseline Schedule• Select Methodology• Be aware of Concurrency• Identify Chronology of Delay• Identify Responsibility for Delay• Identify Duration of Delay• Understand Float• Delay MUST be critical• Recovery /Mitigation Efforts• Understand Overall Delay Issue

Conclusion

• Implementation of BMP – Specs, Processes• Project Controls Standardization- Timely• Documentation!!!!!!!!!!!!• Contract Awareness• Early Notification, Early Resolution

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THANK YOU!!!!!!!

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Questions and Answers